Obama’s new overtime rule may lead to more job openings
There’s more seismic change about to rock the nation — and workers like Michelle Herrera, who’ve toiled for low pay, say this tremor will raise compensation in the stagnant-wage economy.
A new Obama administration rule, set to take effect Dec. 1, seven weeks before President-elect Donald Trump takes the White House, will see an estimated 12.5 million salaried US workers suddenly eligible for time-and-a-half overtime pay — and mandatory OT extended to more than 4 million workers, according to the Department of Labor.
“Yes, I like this news a lot,” said a jubilant Herrera, 30, a former worker at Chipotle near Columbia University, who joined a class-action suit by the law firm of Outten & Golden alleging her overtime rights were violated. “I just wish this rule was in place when I was at Chipotle,” she added.
Although many employers are expected to circumvent the rule, there’ll be no escaping the ripple effects, say some analysts, once businesses are mandated, under certain parameters, to extend OT to salaried workers earning less than $913 for a 40-hour work week, double the current average of $455 nationwide. (It’s currently $674 in New York State.)
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The overall impact, said Judy Conti of the National Employment Law Project, will be like a virtuous circle: More workers compensated for overtime at the same time as more employers are curbed from keeping workers on the job, in sweatshop-like conditions, after 40 hours without extra pay. “It will spread the work around too,” Conti added.
One estimate by Goldman Sachs actually forecast a 10 percent to 15 percent reduction in employees working overtime among the ranks of the affected. But that will then open up hiring for 120,000 new workers to plug the gaps, explained Goldman.
Herrera, with a bachelor’s degree from Syracuse University, recalls her long hours at Chipotle, claiming weekly overtime pay after she put in 40 hours was unheard of — indeed, 50-hour work weeks were not uncommon at fast-food chain, she said.
“It was long hours on your feet, and very tiring,” she said. Under the new threshold, more workers at Chipotle and other service outlets are newly positioned to be eligible for time-and-a-half pay, analysts say.
Herrera has seen it from both sides. After finishing at Chipotle in 2011, she took a job in education. Today, she manages four employees as an operations manager at a Charter School on the Upper East Side.
“The rule won’t directly impact me, but it will impact some of my team members, and I am grateful to my company for recognizing overtime,” she said.
Still, the new rule has come in for some criticism — one beef is that it will perpetuate and expand the low-wage economy.
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Goldman estimated average hourly earnings would rise by a meager 0.1 percentage point. It added that lower-cost replacement labor would push that even lower.